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15 January 2014
Initial ship arrest in New Zealand can be fast and relatively inexpensive. It requires a notice of proceeding relating to an in rem claim (ie, a claim directly against a vessel) and an application for arrest, supported by affidavit, to be filed, but does not require a hearing. An undertaking to meet the costs of the registrar is also required. The proceeding must relate to a claim falling within the heads of jurisdiction set out in the Admiralty Act 1973. The time and cost involved in maintaining the arrest and claim against the ship, and possibly obtaining judicial sale, will depend on a range of factors. Provided that all of the necessary information (including translations, if required) is available, the proceeding can be prepared and the application for arrest made within a short time of the instruction being received. It is then in the hands of the court to arrest the vessel, which it must do once it has received the requisite documents. The court effects the arrest by affixing the warrant of arrest to the bridge of the vessel and leaving a copy with the person who appears to be in charge. Arrest is usually done within a few days of receipt of the application. Once the vessel has been arrested, it is in the custody of the High Court registrar and cannot be moved without the registrar's consent.
New Zealand is not a signatory to any international conventions dealing specifically with arrests. Instead, ship arrests are governed by the Admiralty Act and the High Court Rules.
Arrest is available, irrespective of the flag state of the vessel, for claims that are maritime liens under the common law, or that come under Section 4(1) of the Admiralty Act. Maritime liens arise for damage done by a ship, salvage, bottomry and respondentia, master's wages and expenses and seafarers' wages. In addition, claims under the Admiralty Act include:
For claims based on a maritime lien, arrest is available irrespective of the beneficial ownership of the vessel. For other claims, however, the debtor against which the in personam claim arises must also be the owner or demise charterer of the vessel at the time that the action is brought.
Even if a claim comes within these categories, where the arresting party has acted in bad faith or with gross negligence, an arrest will be wrongful and will give rise to a claim for damages for wrongful arrest. It is not enough that the claim is made on a mistaken basis.
For some claims, a sister ship may be proceeded against. The following cannot be transferred to a sister ship:
For other claims falling within Section 4(1) of the Admiralty Act, a sister ship may be proceeded against if the person liable on the claim was the owner or charterer of the ship when the cause of action arose and was the beneficial owner or demise charterer of the other ship when the action was brought.
A ship can be arrested if the relevant person was the owner or charterer, or in possession or control of the ship, when the cause of action arose and – when the action was brought – was beneficial owner or demise charterer of the ship. Arrest of a ship that is under time charter is unavailable in relation to claims against the time charterer.
The courts do not require counter-security. However, a party seeking the arrest of a ship is required to provide an indemnity to the registrar for the costs likely to be incurred by the vessel to be arrested, such as harbour dues and crew expenses. The registrar requires some upfront payment to cover initial arrest costs and then to be kept in funds in anticipation of subsequent costs.
Once a vessel has been arrested, there is often rapid payment of the debt so that the vessel can be released, although this is not always the case. Where a claim is disputed, the vessel owner can make payment into court as security for the claim so that the vessel can be released and the funds can be held in court until the dispute has been decided.
Once the vessel has been arrested, a statement of claim setting out the nature of the claim must be filed. If the defendant enters an appearance following the arrest, the statement of claim must be filed within 10 working days. The New Zealand court will accept jurisdiction, but there may be issues of jurisdiction if the claim is contract based or if a cross-border insolvency is involved.
The court can order vessels to be sold pendente lite (ie, before the hearing of the substantive claim). The time that it will take to obtain an order for sale before trial will depend on:
The New Zealand High Court also has jurisdiction to grant freezing orders over any type of asset and, while such orders can extend to ships, the powers do not relate specifically to vessels. It is harder to obtain a freezing order than it is to arrest a vessel; an application is usually made without notice and before a freezing order can be issued, the applicant must (usually by way of a contested hearing):
In contrast, for an arrest, the applicant must file:
No real interrogation of the matters set out in the notice and affidavit is carried out and the warrant for arrest is issued without a hearing. The applicant is required to provide an indemnity to the registrar, but this is limited to the costs of arrest and does not cover any damages suffered as a result of the arrest.
For further information on this topic please contact Chris Browne, Felicity Monteiro or Kerryn Webster at Wilson Harle by telephone (+64 9 915 5700), fax (+64 9 915 5701) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Wilson Harle website can be accessed at www.wilsonharle.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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